The Responsible Endowment Project - $*

Corrections Corporation of America

In 1983, Corrections Corporation of America was founded: a company that manages, builds and designs private prisons, facilitating prisoner transportation through its outgrowth company TransCor America. This company began the modern prison privatization movement in the united States. By 2005, CCA had grown to include the operation of 63 prisons, and the housing of 62,000 incarcerated persons (1). CCA has become the fourth largest manager of prisons in the country - behind the federal system and those systems of two states (2), today, managing 4.6% of the total inmates in the country. The private prison enterprise incepted by CCA blossomed in in the 1990’s due to decreasing governmental fiscal regulations, the passage of laws in many states that made the operation of private prisons a legal engagement, the passage of stricter ‘repeat offender’ laws predominantly in the field of drug policy, and the increased governmental spending that followed the severer policies (over 17 billion dollars in 2000) (3). The number of prisoners in the United States increased from 319,598 to 1,316,333 persons from 1980 to 2000 (4).

Though the CCA and organizations like it remain private corporations, they are increasingly participating in federal governmental activity. In 1999, Attorney General Janet Reno announced that there would be seven new federal prisons built within the year and of these establishments, five would be operated by the private sector (4).

Private Prisons are not legal in the state of Connecticut.

By researching Security & Exchange Commission documents, the Graduate Employees & Students Organizing at Yale (GESO), the unrecognized graduate student union, discovered that Yale, through its partnership with Farallon Capital Institutional Partners II, a subdivision of Farallon Capital Management, had invested 1.5 million dollars in CCA (5). As published on FIN Alternatives: Hedge Fund & Private Equity News it is estimated that Yale owns over 88% of Farallon Capital Institutional Partners II, the fund that is invested in CCA (6). In May 2005, Farallon Capital Management owned approximately 47,000 shares of CCA (6).

In response to student, faculty and administrative resistance to Farallon’s ownership in CCA, Farallon moved to reduce its stake in the company and Yale’s indirect holdings decreased from 1.5 million dollars to 500,000$ (7) by the close of the financial quarter in December 2005. Though in December 2005, upon meeting with GESO, the Advisory Committee on Investor Responsibility (ACIR) resolved that the direct investment in Farallon Capital Management and the indirect investment in CCA were not accountable for any “grave social injury” (7).

Whether or not an investment creates “grave social injury” is the main criterion used by John G Simon, Charles W. Powers, & Jon P. Gunnemann in The Ethical Investor, a book published in 1972 by Yale University Press, to determine whether an investment is acceptably socially responsible. The Ethical Investor is viewed by the ACIR as the the standard guide for ethical investing. Geert Rouwenhorst, the chair of the ACIR, explained the Committee’s refusal to pass a divestment referendum by stating the following:

The question is, Is it something that violates the principles of ethical investing that The Ethical Investor set forth? At this point, we are not convinced that it is. (1)A “Grave Social Injury” is defined in The Ethical Investor as a “violation or frustration of domestic or international legal norms meant to protect against deprivations of health, safety, or basic freedoms" (8). The Investment Office is structured such that if the ACIR decides that the investment does not pose a “grave social injury”, then no action can be taken: Levin is quoted in the Yale Daily News as saying "I referred the issue to the ACIR, and that's the process we use...Their conclusion was that this was not a case that warranted divestment under our policy" (9). It was as if no further action could be taken, and yet it was revealed in March of 2006, that in fact Yale’s investments in the company had substantially decreased by the end of December 2005 - likely as a result of mass student and faculty outcry visible in the extensive rally that took place on December 1st, 2005 in Beinicke Plaza (10).

By May 12, 2006, as revealed by Yale’s Securities and Exchange Commission documents, Yale had completely divested from CCA, though Rouwenhourst insisted that the ACIR maintained their previous decision: CCA remains an ethically viable establishment (11). Zachary Bagdon of the Yale School of Management’s International Center for Finance revealed to the Yale Daily News that Farallon’s motives were most likely profit - driven. Divestment made economic sense. The decision did not seem to be based on the “serious constitutional concerns” that Roger C. Vann, executive director of the American Civil Liberties Union in Connecticut, believes are raised by profiting of off human incarceration, calling the “‘prison industrial complex’... the new apartheid” (12).

It is sensical that Vann feels so strongly about private prisons in the United States. One of the chief complaints against private prison enterprises and more specifically against the CCA are the actions taken by the corporation that are driven by the incentive the corporation has to keep more individuals incarcerated, an achievement that would generate the highest returns. 90% to 95% filled capacity is necessary to attract the large investments that are needed to run the corporation - to encourage confidence in speculators (1). James Scott, a political science professor at Yale reiterated this sentiment when he discussed how “CCA has a direct profit motive for maximizing the number of prisoners that come through its doors and the time they spend incarcerated” (10). Beyond the ethical problem in benefitting from human imprisonment, CCA and other private prison companies, fueled by the promise of large returns, have attempted to pressure the U.S. government to pass legislation that would make it easier for milder offenders to go to prison and that would increase the average convict’s time spent there. Because of its involvement in the American Legislative Executive Council (ALEC) , it would be easy for the CCA to directly influence policy and many believe it has had a role in drafting model mandatory minimum sentencing legislation (13). The CCA is further involved in ALEC through ALEC’s Criminal Justice Task Force on which the CCA has a seat. A CCA executive was the co-chair of the Task Force until recently (13). Some examples of the model policies to come out of the Task Force are 1.) Three Strikes Laws - severe consequences for repeat offenders and 2.) ‘Truth-In-Sentencing’ - an ordinance that would decrease the possibility for parole. CCA, by using its power networks is suspected to have influenced legislation - lobbying for intensified punishment measures.

There is also the ethical problem in determining whether or not an investment is socially responsible if it assists and propagates racist action. In the case of the CCA, many such as Yale political science professor Joen Roemer, think that the private prison corporations are racist institutions due to this disproportional amount of African-Americans and Hispanics imprisoned in these private incarceration centers (10).Finally, it seems as if CCA has been host to numerous human rights abuses in its twenty-five years of existence. As researched by the Corporate Research Project of Good Jobs First in collaboration with the Prison Privatisation Report International in London it has been documented that CCA has been tried in court for the 1.) The Lack of acceptable medical care 2.) The inability to control violence on the premises and for 3.) Living conditions that have prompted inmate rebellion (14). Furthermore, CCA has also operated under self-defeating labor policies - keeping wages and employee pension funds low. This has had a detrimental effect on the corporation leading to understaffing, an effect that has caused further consequences: prisoner mistreatment and dangerous conditions (14).

These ethical problems persisted through the years that Yale had holdings in Corrections Corporation of America, and yet even in the final stages of divestment the ACIR, trapped by the limitedness of their criterion, did not acknowledge the social dangers of their investment in private prisons.